FIRST DIVISION

[G.R. No. L-31831. April 28, 1983.]

JESUS PINEDA , petitioner, vs. JOSE V. DELA RAMA and COURT OF

APPEALS , respondent.

Rosauro Alvarez for petitioner.

Arturo Zialcita for respondents.

SYLLABUS

1. COMMERCIAL LAW; NEGOTIABLE. INSTRUMENTS LAW; SECTION 24;

CONSIDERATION; PRESUMPTION THAT NEGOTIABLE INSTRUMENT IS ISSUED FOR
VALID CONSIDERATION IS ONLY PRIMA FACIE . — The Court of Appeals' reliance on
Section 24 of the Negotiable Instruments Law is misplaced. The presumption that a
negotiable instrument is issued for a valuable consideration is only prima facie. It can
be rebutted by proof to the contrary.
2. CIVIL LAW; CONTRACTS; VOID CONTRACT; PROMISSORY NOTE
EXECUTED FOR AN ILLEGAL CONSIDERATION. — The consideration for the promissory
note — to in uence public o cers in the performance of their duties — is contrary to
law and public policy. The promissory note is void ab initio and no cause of action for
the collection cases can arise from it.

DECISION

GUTIERREZ, JR. , J : p

This is a petition to review on certiorari a decision of the Court of Appeals which

declared petitioner Jesus Pineda liable on his promissory note for P9,300.00 and
directed him to pay attorney's fees of P400.00 to private respondent, Jose V. dela
Rama.
Dela Rama is a practicing lawyer whose services were retained by Pineda for the
purpose of making representations with the chairman and general manager of the
National Rice and Corn Administration (NARIC) to stop or delay the institution of
criminal charges against Pineda who allegedly misappropriated 11,000 cavans of palay
deposited at his ricemill in Concepcion, Tarlac. The NARIC general manager was
allegedly an intimate friend of Dela Rama. prcd

According to Dela Rama, petitioner Pineda has used up all his funds to buy a big
hacienda in Mindoro and, therefore, borrowed the P9,300.00 subject of his complaint
for collection. In addition to ling the suit to collect the loan evidenced by the matured
promissory note, Dela Rama also sued to collect P5,000.00 attorney's fees for legal
services rendered as Pineda's counsel in the case being investigated by NARIC.
The Court of First Instance of Manila decided Civil Case No. 45762 in favor of
petitioner Pineda. The court believed the evidence of Pineda that he signed the
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 promissory note for P9,300.00 only because Dela Rama had told him that this amount
had already been advanced to grease the palms of the Chairman and General Manager
of NARIC in order to save Pineda from criminal prosecution.
The court stated:
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". . . The Court, after hearing the testimonies of the witnesses and
examining the exhibits in question, nds that Exhibit A proves that the defendant
himself did not receive the amount stated therein, because according to said
exhibit that amount was advanced by the plaintiff in connection with the
defendant's case, entirely contradicting the testimony of the plaintiff himself, who
stated in open Court that he gave the amount in cash in two installments to the
defendant. The Court is more inclined to believe the contents of Exhibit A, than the
testimony of the plaintiff. On this particular matter, the defendant has established
that the plaintiff made him believe that he was giving money to the authorities of
the NARIC to grease their palms to suspend the prosecution of the defendant, but
the defendant, upon inquiry, found out that none of the authorities has received
that amount, and there was no case that was ever contemplated to be led
against him. It clearly follows, therefore, that the amount involved in this Exhibit A
was imaginary. It was given to the defendant, not to somebody else. The purpose
for which the amount was intended was illegal.

"However, the Court believes that plaintiff was able to get from the
defendant the amount of P3,000.00 on October 7, as shown by the check issued
by the defendant, Exhibit 2, and the letter, Exhibit 7, was antedated October 6, as
per plaintiff's wishes to show that defendant was indebted for P3,000.00 when,
as a matter of fact, such amount was produced in order to grease the palms of
the NARIC o cials for withholding an imaginary criminal case. Such amount was
never given to such o cials nor was there any contemplated case against the
defendant. The purpose for which such amount was intended was indeed illegal."

The trial court rendered judgment as follows:

"WHEREFORE, the Court nds by a preponderance of evidence that the
amount of P9,300.00 evidenced by Exhibit A was not received by the defendant,
nor given to any party for the defendant's bene t. Consequently, the plaintiff has
no right to recover said amount. The amount of P3,000.00 was given by the
defendant to grease the palms of the NARIC o cials. The purpose was illegal,
null and void. Besides, it was not given at all, nor was it true that there was a
contemplated case against the defendant. Such amount should he returned to the
defendant. The services rendered by the plaintiff to the defendant is worth only
P400.00, taking into consideration that the plaintiff received an air-conditioner
and six sacks of rice. The court orders that the plaintiff should return to the
defendant the amount of P3,000.00, minus P400.00 plus costs."

The Court of Appeals reversed the decision of the trial court on a nding that
Pineda, being a person of more than average intelligence, astute in business, and wise
in the ways of men would not "sign any document or paper with his name unless he was
fully aware of the contents and important thereof, knowing as he must have known that
the language and practices of business and of trade and commerce call to account
every careless or thoughtless word or deed."
The appellate court stated:

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 "No rule is more fundamental and by men of honor and goodwill more
dearly cherished, than that which declares that obligations arising from contracts
have the force of law between the contracting parties and should be complied
with in good faith. Corollary to and in furtherance of this principle, Section 24 of
the Negotiable Instruments Law (Act No. 2031) explicitly provides that every
negotiable instrument is deemed prima facie to have been issued for a valuable
consideration, and every person whose signature appears thereon to have
become a party thereto for value."

We find this petition meritorious.

The Court of Appeals relied on the e cacy of the promissory note for its
decision, citing Section 24 of the Negotiable Instruments Law which reads:
SECTION 24. Presumption of consideration. — Every negotiable instrument is
deemed prima facie to have been issued for a valuable consideration and every person
whose signature appears thereon to have become a party thereto for value."
The Court of Appeals' reliance on the above provision is misplaced. The
presumption that a negotiable instrument is issued for a valuable consideration is only
prima facie. It can be rebutted by proof to the contrary. (Bank of the Philippine Islands
v. Laguna Coconut Oil Co. et al., 48 Phil. 5)."
According to Dela Rama, he loaned the P9,300.00 to Pineda in two installments
on two occasions ve days apart — rst loan for P5,000.00 and second loan for
P4,300.00, both given in cash. He also alleged that previously he loaned P3,000.00 but
Pineda paid this other loan two days afterward.
These allegations of Dela Rama are belied by the promissory note itself. The
second sentence of the note reads — "This represents the cash advances made by him
in connection with my case for which he is my attorney-in-law."
The terms of the note sustain the version of Pineda that he signed the P9,300.00
promissory note because he believed Dela Rama's story that these amounts had
already been advanced by Dela Rama and given as gifts for NARIC officials.
Dela Rama himself admits that Pineda engaged his services to delay by one
month the ling of the NARIC case against Pineda while the latter was trying to work
out an amicable settlement. There is no question that Dela Rama was indeed a close
friend of then NARIC Administrator Jose Rodriquez having worked with him in the
Philippine consulate at Hongkong and that Dela Rama made what he calls "proper
representations" with Rodriguez and with other NARIC o cials in connection with the
investigation of the criminal charges against Pineda. Cdpr

We agree with the trial court which believed Pineda. It is indeed unusual for a
lawyer to lend money to his client whom he had known for only three months, with no
security for the loan and on interest. Dela Rama testified that he did not even know what
Pineda was going to do with the money he borrowed from him. The petitioner had just
purchased a hacienda in Mindoro for P210,000.00, owned sugar and rice lands in Tarlac
of around 800 hectares, and had P60,000.00 deposits in three banks when he executed
the note. It is more logical to believe that Pineda would not borrow P5,000.00 and
P4,300.00 ve days apart from a man whom he calls a " xer" and whom he had known
for only three months.
There is no dispute that an air-conditioning unit valued at P1,250.00 was
purchased by Pineda's son and given to Dela Rama although the latter claims he paid
P1,250.00 for the unit when he received it. Pineda, however, alleged that he gave the air-
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 conditioning unit because Dela Rama told him that Dr. Rodriguez was asking for one air-
conditioning machine of 1.5 horsepower for the latter's NARIC o ce. Pineda further
testi ed that six cavans of rst class rice also intended for the NARIC Chairman and
General Manager, together with the air-conditioning unit, never reached Dr. Rodriguez
but were kept by the lawyer.
Considering the foregoing, we agree with the trial court that the promissory note
was executed for an illegal consideration. Articles 1409 and 1412 of the Civil Code in
part, provide:
Art. 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good
customs, public order and public policy;
xxx xxx xxx
Art. 1412. If the act in which the unlawful or forbidden cause consists does
not constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may
recover what he has given by virtue of the contract, or demand the performance of the
other's undertaking.
xxx xxx xxx
Whether or not the supposed cash advances reached their destination is of no
moment. The consideration for the promissory note — to in uence public o cers in the
performance of their duties — is contrary to law and public policy. The promissory note
is void ab initio and no cause of action for the collection cases can arise from it. cdrep

WHEREFORE, the decision of the Court of Appeals is SET ASIDE, The complaint
and the counterclaim in Civil Case No. 45762 are both DISMISSED.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.

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